How managed care caused the mental health care crisis

by George H. Northrup, PhD

No one becomes a mental health professional—in my case, a clinical psychologist—for the financial rewards.

With comparable (or less) education, far more lucrative careers exist in law, business, or other health care specialties.  Psychotherapy tends to draw practitioners who are fascinated by the mysteries of the mind and who find satisfaction helping others in distress.   Money has typically been a secondary consideration.

Until about 15 years ago, one could, nonetheless, enjoy the satisfactions of a worthwhile occupation, a reasonable degree of professional autonomy, and some genuine financial security.  Since then, mental health care has been slipping into crisis, and the crisis is largely about money.

Previously, psychologists set fees based on their training and experience, and health insurance companies typically reimbursed patients a portion of that amount.  Traditional indemnity plans still work that way.  But mental health benefits are now commonly “managed,” such that patients may be restricted to doctors in the insurance company’s network, and doctors who want to be in the network must accept drastically-reduced fees.  Anti-trust laws prohibit health care providers in private practice from organizing to negotiate more equitable fees, so the drastically lower rates are “take it or leave it.”

How much lower? A psychologist working with managed care today receives a total fee about equal to what I charged in 1987.  Adjusted for inflation, per session fees have declined 47 per cent over that period of time.

Managed care had been introduced as a means of bringing equity to health care utilization by ensuring that those who receive treatment actually need it, based on their symptoms and level of impairment.  So far, so good. But managed care companies can only justify their existence (and cover their own costs) by finding more “waste” to trim.  Hence the downward pressure on fees.

Mental health has proved especially vulnerable to the ravages of managed care because its patients tend not to be assertive about their right to treatment and because the subjective nature of emotional distress makes it easier to deny or restrict, by way of pre-approvals and treatment reviews, than many medical conditions whose symptoms can be documented with blood tests or x-rays.

Instead of bringing equity, managed care fees have begun to restrict access to care.  Prospective patients have more trouble finding therapists with time to see them or who will accept fees that barely cover taxes and operating costs.  Reimbursements are now so low that even large medical centers are feeling the squeeze.  A prestigious teaching hospital near my office realized a few years ago it was losing money on mental health care.  Waves of layoffs followed, including ultimately the closing of a day treatment center and an inpatient unit.  Children’s services were hit hardest of all.

While managed care has been keeping psychotherapy costs artificially low, its business model has been thriving.  The New York Times reported in May, 2011 that health insurance companies were experiencing their third consecutive year of record profits, while at the same time defending double-digit increases in the premiums they charge.  Locally, the Health Insurance Plan of New York several years ago doubled the compensation of its top executives.  On a national level, the ten highest-paid managed care executives collectively took home (including stock awards, options, and bonuses) enough money to finance a million psychotherapy sessions per year at a reasonable fee, or two million at current rates.  There is no shortage of people in need of help: current estimates are that more than one third of mental health disorders (affecting eleven million persons) remain untreated.

Publicly-funded reimbursements are also lower.  Medicare, which formerly set fees based on the complexity of the service, indexing these annually for inflation, has cut payments to psychologists almost every year since 2005.  In New York, Medicaid payments to psychologists in private practice are sharply lower than managed care rates.

Although the overall cost of health care gallops ahead at an unsustainable level, cost-containment in mental health has been more than successful.  Even with many more people making use of treatment, mental health and substance abuse dropped from 8.3 per cent of total expenditures in 1993 to about 7.5 per cent more recently.  Cost-effective outpatient psychotherapy represents less than one-third of that amount.

Feeling this financial squeeze, practitioners nearing retirement are waiting for their Social Security retirement benefits to supplement their earnings as psychologists.  New graduates wonder how to pay for their student loans or support a family on the income they can generate as psychologists.  Although nearly all still love their work, no one I talk to would recommend the field to a son or daughter.  Perhaps most telling of all, the American Psychological Association has for years now encouraged its members who practice psychotherapy to find other occupational niches.

The enormous burden of the nation’s total medical bill, now over $2.5 trillion and growing faster than GNP, will have to be addressed eventually.  When the ax threatens to fall, no doubt every branch of health care will protest.  The most influential players—insurance and pharmaceutical companies, healthcare conglomerates—will strive to protect their financial interests at the expense of less powerful sectors.  By comparison, the amount of clout that mental health can bring to these negotiations is trivial.

As recent reform has focused the nation on the costs and inequities in health care, the field of mental health will need extraordinary infusions of popular and political support to reverse these recent trends and preserve a vibrant and effective network of psychologists offering psychotherapy.  Nearly every family in America has felt the impact of psychological problems.  A significant body of research demonstrates that psychological treatments are highly effective.  Now the question is: will help still be there when it’s needed?

George H. Northrup is past president of the New York State Psychological Association.

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